It's weird how economics isn't pretend

Cato@Liberty's Jagadeesh Gokhale points out something I've been saying for years: health care costs are skyrocketing because the government is pumping so much money into health care. The supply of health care is fairly inelastic, especially over the short run, and especially with the heavy government interference in the creation of new supplies (occupational licensing, accrediting new medical schools, the restrictions placed on all manner of healthcare businesses, etc.). So when the government pumps money in, what you get is more dollars divided by a fairly constant supply, or a higher per-unit price.

But it gets worse. See, the government doesn't subsidize everyone's health care equally. The people who get the most health care money from the government are old people, who also have the highest demand for health care and (completely coincidentally I'm sure) lurch zombie-like to the polls every election day to vote however AARP tells them. So I drew a little graph to illustrate, in a very simplified fashion, what happens when one group gets a subsidy.

Obscenities make it more scientific

To the right, you'll see a simple graphical representation of the health care market. Here I am pretending that everything is at peace in a market that has found an equilibrium quantity and price, noted as C. Then, a market segment has its health care subsidized. This segment's demand moves to point M, but since supply is inelastic, supply doesn't follow. Instead, a shortage follows, and everyone else's prices rise. That red triangle represents this loss. Your prices are at the top right of this triangle, while Grandma's prices are at the bottom right, and what Grandma has to say to you about all this is at the extreme right of the graph.

Of course, the health care market and the impact of government interference in it is far, far more complex than this little graph, but I think the basic point is valid. Price ceilings cause shortages, and selective price ceilings are even worse, since everyone who doesn't benefit from the price ceiling is forced to subsidize- twice over, through our FICA taxes and through higher prices- those who do benefit. So fuck you too, old people.